Conservative think tank proposes cuts to prevent tax increases

CARSON CITY — A Las Vegas-based conservative think tank called today for state government to consider eliminating the Department of Business and Industry and make numerous other changes that it believes would eliminate the need for tax increases at this year’s Legislature.

In a report by Nevada Policy Research Institute analysts Geoffrey Lawrence and Patrick R. Gibbons, the organization proposes sweeping reforms that generally would make state government operate more like a private business.

The recommendation drew criticism from one state legislator who said such a cutback would eliminate crucial oversight of some industries, including mining safety. The agency also regulates the banking and mortgage industries, among others.

The NPRI’s boldest recommendation calls for legislators and the governor to consider eliminating the Department of Business and Industry, along with the Commission on Tourism, and the Commission on Economic Development.

If these departments had been eliminated in 2007, then the state would have saved about $385 million, according to the analysts.

The Business and Industry Department, the report states, “exists for the sole purpose of subsidizing specific industries and protecting favored producers from competition.”

“Government-run 'economic development’ agencies typically punish the bulk of private industry through higher taxes while arbitrarily picking a few 'winners’ to receive the benefits of those tax dollars,” it adds.

NPRI submitted its “Recommendations for Cost-Cutting and Reform” to Gov. Jim Gibbons and the 63 legislators.

Andy Matthews, NPRI’s vice president for communications, said his organization does not endorse candidates or political parties and he hopes both Democrats and Republicans will examine the recommendations and speak to the institute’s staff if they want further information.

He said NPRI isn’t talking about eliminating Business and Industry tomorrow, but the state at least should look at the agency and find whether all of its duties are necessary.

The agency oversees the banking industry, real estate agents, mortgage brokers, a first-time home buyers program, workers’ compensation, worker and miner safety programs and the Taxicab Authority in Clark County.

“You can’t eliminate some of these things unless we don’t want to regulate them at all,” said Assemblywoman Sheila Leslie, D-Reno. “I don’t think it would be very wise to eliminate mine safety programs.”

Leslie said a recent legislative audit found “horrible” problems in the mortgage lending industry. Companies should not have made so many bad loans, she said, and the state should not stop regulating them all together. Instead, regulations should be improved, she said.

Gibbons will outline his plans for state government for the next two years when he delivers his State of the State message Jan. 15.

He and legislators have cut planned state general fund spending by $1.5 billion during the past year because of declining tax revenue.

The Economic Forum, a group of five business leaders, decided in December that the state will have $5.65 billion in tax revenue to spend over the next two-year budget cycle. That is much less than the $6.8 billion in revenue the state expected to receive during the current, two-year budget period when the Legislature adjourned in June 2007.

Daniel Burns, Gibbons’ communications director, said the governor wants people to offer ideas to reduce government spending, but that eliminating an entire department was a dramatic step.

While the administration will discuss the NPRI suggestions, he said the Business and Industry Department provides “many necessary services.”

“We don’t care where good ideas come from, as long as they do not call for tax increases and are good ideas,” Burns said.

Gibbons announced previously that he wants to combine the commissions on tourism and economic development, but not eliminate them.

Matthews questioned the effectiveness of the government regulation over businesses and said if some regulation over specific industries is needed, then it could be transferred to another agency.

Among the NPRI recommendations are:

—Instead of contributing money for its employees to the Public Employees Retirement Program, state government should set up 401K retirement programs, such as those offered by private industry for its workers. PERS has lost $4 billion on its investment since July and NPRI said the state taxpayers could be subjected to tax increases to cover its unfunded liabilities.

Even if the state cannot end participation in PERS for current workers, Matthews said the state should start now to offer just 401K benefits to newly hired workers.

—Base pay increases for state employees on merit, not simply seniority. Allow them to share in savings when they perform a project under budget.

—Use competitive contracting to staff government agencies. Florida has saved $5.5 billion since 1995 through bidding for work projects, according to the report.

—End the class-size reduction program in elementary schools and instead focus on retaining high quality teachers. Give teachers merit pay increases when it is shown students are progressing. Encourage additional charter schools as a way to reduce spending on education.

Contact reporter Ed Vogel at evogel@reviewjournal.com or 775-687-3901.